Ways to setup Sole Proprietorship in India

ways to setup Sole Proprietorship
Swarit Advisors
| Updated: May 16, 2018 | Category: Sole Proprietorship

Setup Sole Proprietorship Registration is a simple form of business entity with minimum regulatory compliance. It is owned by the single owner whose liability will be unlimited. Under this, the owner is called as Sole Proprietor. To start with a sole proprietorship, one has to acquire license according to the business type such as registration under GST, Shops, and Establishment Act, MSME registration and food license in case of the food business. However, there are threshold limits which exempt from compulsory registration.

Features of Sole Proprietorship Registration

  • Full control over the business
  • Unlimited Liability
  • Decision-making power
  • No Perpetual Succession
  • It is not a separate legal entity
  • Lesser regulatory compliances

Advantages of Sole Proprietorship Registration

  • Easy formation
  • Taxation Benefits
  • Decision-making power
  • Less legal compliances
  • Lower formation cost

Disadvantages of Sole Proprietorship Registration

  • Limited Ideas
  • Unlimited Liability
  • Lack of Credibility
  • Inability to raise funds
  • Further addition of partners cannot be done

Documents required for setting up Sole Proprietorship Registration

There is no prescribed process of Sole Proprietorship Registration. It can be done as per the type of business activity.

In case of the registration under Shops & Establishment Act

  • Copy of PAN of Proprietor
  • Copy of Identity Proof (Aadhar/ Passport/ Voter ID)
  • Bank Statement
  • Copy of Address Proof
  • Passport Size Photograph

In the case of Tax Registration (GST Registration)

One has to obtain GST registration, in case turnover exceeds Rs.20 lakhs and Rs.10 lakhs in case of the northeast region. However, in some cases, GST registration is required to be obtained.

Following below-mentioned documents are required for GST registration:

  • Copy of PAN
  • Copy of Aadhar Card
  • Proof of business location
  • Copy of bank statement
  • Passport size photograph

In case of Bank Account Opening

The bank account can be opened on the name of the Company if the proprietor has obtained any of the licenses. As banks ask for legal certification from the proprietor.

Following below-mentioned documents are required for bank account opening as per RBI for KYC such as:

  1. A license issued under Shops & Establishment Act;
  2. GST registration certificate
  3. Certificate of Practice issued by authorities such as following:
  • Institute of Chartered Accountants of India,
  • Institute of Cost Accountants of India,
  • Institute of Company Secretaries of India,
  • Indian Medical Council, Food and Drug Control Authorities.
  1. A license issued by Central or State Government to the proprietors.
  2. IEC (Import Export Code) issued to the proprietor by the DGFT.
  3. Income Tax Return (ITR)
  4. Utility bills on the name of the proprietor.

Usually, sole proprietor finds it difficult to manage all the business activities solely and they decide to convert it into another form of business entity.

A sole proprietorship is best for small entrepreneurs as it involves low formation cost. Our team of experts will help you in Sole Proprietorship Registration process. They will verify the documents and start the necessary process.

Also, Read: What are the Reasons to Apply for Sole Proprietorship Registration?.


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